Does after soft landing your worldwide income is taxable in Canada?

[Puneet342]

Hi All,

I am going to do my first landing in Canada end of this month. I am going to be there for a period of 1 month in which I plan to apply for my PR Card, SIN Card, Open up a Bank Account & get my G2 driving license on the basis of Driving experience letter & the other required documents that I got from my current country of residence. After a period of 1 month & accomplishing whatever I have mentioned above, I will be back in my current country of residence & I plan to move to Canada permanently only after a period of 2 years. My first question is that will my income in these 2 years in my current country of residence would be taxed when I finally move to Canada or not? Secondly, I want to know whether I should take all the funds that I have upon my first Landing itself or I can take them with me when I finally move after 2 years without tax being applied?

 

[mad_hatter]

If you are doing a soft landing, you can remain as non-resident for tax and do not have to pay Canadian tax for the income you earn overseas. However, you must be careful when you open a bank account, you must inform the bank you are a non-resident so the bank can withhold tax on earned interest. Credit card and driver license are only issued to Canadian resident, so getting them would not be a good idea. CRA might interpret that you are a resident and ask you to pay tax on worldwide income.

 

[Puneet342]

If you are doing a soft landing, you can remain as non-resident for tax and do not have to pay Canadian tax for the income you earn overseas. However, you must be careful when you open a bank account, you must inform the bank you are a non-resident so the bank can withhold tax on earned interest. Credit card and driver license are only issued to Canadian resident, so getting them would not be a good idea. CRA might interpret that you are a resident and ask you to pay tax on worldwide income.

Thanks a lot for your reply. How can i confirm upon this fact that CRA will consider me a resident & taxable or not? There are a lot of places where i have read that Driving License has nothing to do with Taxation & also, credit cards are just good to make your credit history, they also do not have a significant impact in deciding whether you are a taxable resident of Canada.

 

[mad_hatter]

The motor licencing branch will not issue you a driver license if you cannot provide an address in the province. Same as getting a credit card, the bank will not give you a credit card unless you have a Canadian address. If you provide one then you are admitting that you live in Canada therefore a resident.
These are the ties that CRA will use to determine if you are in fact a tax resident. So why take a chance.

 

[mad_hatter]

There are also other practical considerations.

Unless your country has driver license exchange exchange agreement with Canada, you will have to do a knowledge test and a road test. I doubt this can be done in a month. Also, you will have to surrender your current driver license.

Having a credit card does not automatically give you good credit rating. You have to keep using the card and paying it off. This means using the card in your home country, incurring expensive FX exchange and bank charges. You also need to have funds in Canada to pay off the credit card.

 

[Puneet342]

There are also other practical considerations.

Unless your country has driver license exchange exchange agreement with Canada, you will have to do a knowledge test and a road test. I doubt this can be done in a month. Also, you will have to surrender your current driver license.

Having a credit card does not automatically give you good credit rating. You have to keep using the card and paying it off. This means using the card in your home country, incurring expensive FX exchange and bank charges. You also need to have funds in Canada to pay off the credit card.

I do understand about the license part & will see after visiting the drivetest location that how much time it is going to take in order to get the written test & drive test done.
For the credit card part, yes I am willing to use it overseas & absorb all the FX rate that it requires. Also, I am going to deposit CAD 5000 at first to my account & then wire if more funds are needed while I am using this card.
My only concern is that doing all this should not make me a taxable resident of Canada. Another thing I heard is "n73" form that can be filled & mailed to CRA to obtain your residency status after including all that is mentioned above, however, that form is too detailed asking my exact location overseas, tax treaties of my current country with Canada & if I pay income tax on my current income overseas & all. I find filling this form as getting too much exposed to CRA & allowing them to challenge my income as taxable. Don't know what to do? :-(

 

[mad_hatter]

You can try, but I am sure you cannot get a credit card with a foreign address.

NR73 is optional. Even if CRA tells you that you are non-resident based on your NR73, it is not binding. My tax adviser told not to submit NR73, the less CRA knows the better.

 

[Puneet342]

You can try, but I am sure you cannot get a credit card with a foreign address.

NR73 is optional. Even if CRA tells you that you are non-resident based on your NR73, it is not binding. My tax adviser told not to submit NR73, the less CRA knows the better.

The address that I am going to give to bank for credit card and statements would be of Canada. My brother in law resides in Canada and I can give his address. This is the address I have given for my PR cards to be delivered as well.

 

[mad_hatter]

If your banking address is in Canada, you bank will treat you as resident. There will be no withholding on interest earned and a T5 will be filed with CRA.

 

[karan1987]

I am doing my soft landing in December 2019 and will actually move in December 2020. With regards to transferring my finances to Canada, Is it better to open a bank account once I migrate for good in 2020? If so, does that mean my income and savings that I bring in 2020 will not be taxed? If I open a bank account in 2019 will I be taxed?

 

[alexwenner87]

Hello. Just wondering what did you end up doing.

Soft landed in Canada, stayed 10 days and returned home. I have a bank account, credit card and TFSA. Planning to return and settle next year.

I'm trying to understand if:
1) I must file taxes now or it can wait until next year
2) Am I considered a resident or non-resident in this case?

 

[Mdfaraz]

I am in a similar situation..landed in canada in 2019 - was actually planning to settle there so I opened bank account, credit card and exchanged US license for Canadian license...however didn't find any job in 2 months and found one in US so went back to US...bank account and credit card are still open but no transactions and just about 100$ in that bank account. Do I need to file for taxes in canada?

 

[ryeCatcher]

Same question here planning to land later this month and move only by early next year.
Will I have to file tax and can I open a credit card or bank account to help build credit score?

 

[canuck78]

Same question here planning to land later this month and move only by early next year.
Will I have to file tax and can I open a credit card or bank account to help build credit score?

Would discourage you from opening up a credit card and using it for transactions although you can and then ask CRA whether they consider you a tax resident. Seems easier to minimize ties to Canada until you want to become a tax resident.

 

[canuck78]

I am in a similar situation..landed in canada in 2019 - was actually planning to settle there so I opened bank account, credit card and exchanged US license for Canadian license...however didn't find any job in 2 months and found one in US so went back to US...bank account and credit card are still open but no transactions and just about 100$ in that bank account. Do I need to file for taxes in canada?

Unlikely a tax resident but you would have to ask CRA for the final verdict.